Union Bancaire Privee fund manager Rupert Welchman felt the support of the European Central Bank (ECB) was sufficiently strong to prevent any major market hit from Cyprus, which rejected a proposed levy on bank deposits as a condition for a European bailout earlier this week.

"You've still got the ECB saying it will provide liquidity," said Welchman, whose portfolio is overweight on northern European financial stocks. "Cyprus will, of course, be a clear negative for European sentiment and it is a new and substantial negative, but the bigger picture is that Europe is trying to follow a roadmap to recovery and in this quest, Cyprus is a sideshow," he added.

Earlier, Cyprus's finance minister, Michael Sarris, told CNBC that Russia has been very supportive about the terms of the 2.5 billion euro ($3.2 billion) loan that Cyprus has already received from Russia and that talks were now "looking beyond that."

Growth for the U.K. was revised sharply downwards on Wednesday as finance minister George Osborne presented his budget.

The U.K. economy is now estimated to grow by 0.6 percent in 2013, according to the Office for Budget Responsibility, a revision from a December forecast for 1.2 percent growth.

U.K. monthly unemployment figures for February were released. The number of Britons claiming unemployment benefit fell by 15,000 to 1.542 million - the lowest level for 20 months. The minutes of the Bank of England's monetary policy committee meeting were also released, which showed the bank was increasingly worried about further sterling weakness. Policymakers voted 6-3 against any further asset purchases, which was the same result as a February meeting.

Germany's Federal Statistics Office on Wednesday reported its latest PPI (producer prices index) data - the change in price of goods sold to market when they leave the factory gate. The month-on-month change for February fell 0.1 percent, economists polled by Reuters had expected a 0.2 percent rise.

In stocks news, Deutsche Bank announced on Wednesday that it was revising its 2012 earnings after mortgage-related lawsuits and regulatory investigations; despite the news shares of the bank climbed 2.67 percent.

"The important news is that Deutsche Bank is making progress with its capital ratios," Dirk Becker, from brokerage Kepler Capital Markets told Reuters, adding that it was always better to have charges booked in past results than have them upcoming.

Retail group Metro warned of weak consumer spending in the year ahead, saying it would hold back earnings; shares were 0.5 percent higher.